1 January 17 - Are we able to explain the trends in employment and unemployment in France in 1? In France, 1 was marked by fairly modest growth and a fairly significant fall in unemployment, which is surprising. This leads us to examine the consistency between the trends in: Unemployment (according to the various definitions), the labour force and employment; Employment and value added by major economic sector. In particular, we want to see whether: There have been abnormal withdrawals from the labour force that may explain the sharp fall in unemployment; Productivity has weakened abnormally, and whether this can be explained by the trend in labour costs. We find: Consistency in the figures for employment, training and unemployment; Abnormally strong job creation in services to the point that productivity has fallen. The causes appear to be: On the one hand, jobs in technology services (start-ups); On the other hand, the uberisation of domestic services (retail, transport, catering). These developments are giving rise to an abnormal surge in employment, relative to growth, that can be attributed to the best (start-ups) and the worst (uberisation) of new technologies. Patrick Artus Tel. ( 1) 8 1 patrick.artus@natixis.com @PatrickArtus www.research.natixis.com CORPORATE & INVESTMENT BANKING INVESTMENT SOLUTIONS & INSURANCE SPECIALIZED FINANCIAL SERVICES Distribution of this report in the United States. See important disclosures at the end of this report..
Consistency between unemployment, employment and the labour force in France There are two sources for unemployment in France: - Job-seekers registered at the national employment agency (category A: working very little at most; categories A+B+C: registered at the agency and working part-time); - Job-seekers according to the definition of the ILO (International Labour Organisation), calculated by INSEE. Charts 1A, B and C and A, B and C show that over the past 1 months for which the data are available: - Category A unemployment has fallen by 1,; - Unemployment as per categories A+B+C has increased by,; - Unemployment according to the ILO measure has fallen by 1,......... Chart 1A France: Unemployment per employment agency s definition (in millions) Category A Category A+B+C. 1. 7 8 9 1 11 1 1 1 1 1 17......... 1...7..1.8. Chart 1B France: Unemployment per employment agency s definition (in millions) Category A (LHS) Category A+B+C (RHS). Jan-1 Jul-1 Jan-1 Jul-1 Jan-17........ Chart 1C France: 1-month change in unemployment (in thousands) Category A Category A+B+C..8 Chart A France: Unemployment per ILO's definition (millions of persons)..8.. 1 1.... -1-1.. - Jan-1 Jul-1 Jan-1 Jul-1 Jan-17-1.8 7 8 9 1 11 1 1 1 1 1 17 1.8
.9 Chart B France: Unemployment per ILO's definition (millions of persons).9.1 Chart C France: -quarter change in unemployment per ILO's definition (millions of persons).1.9.9.1.1...8.8...8.8 -. -.1 -. -.1.7 Jan-1 Jun-1 Nov-1 Apr-1 Sep-1 Feb-17.7 -.1 Jan-1 Jun-1 Nov-1 Apr-1 Sep-1 Feb-17 -.1 Charts A, B and C show the trend in employment. 7.7 7. 7. 7..7 Chart A France: Total employment Millions of persons (LHS) Y/Y as % (RHS). 1. 1... 7.7 7.7 7. 7. 7. Chart B France: Total employment Millions of persons (LHS) Y/Y as % (RHS).8.7... -. 7... Sources: Datastream, INSEE, Natixis. 7 8 9 1 11 1 1 1 1 1 17-1. -1. 7. 7. Mar-1 Aug-1 Jan-1 Jun-1 Nov-1 Apr-17... Chart C France: -quarter change in employment (in thousands of persons)..18.18.1.1.1.1.1.1.1.1.8 Mar-1 Aug-1 Jan-1 Jun-1 Nov-1 Apr-17.8 Employment increased by a little over 1, over the four quarters, while the labour force aged 1 to increased by around 1, in 1. We can also look at the national agency s category D unemployment measure, which is the number of unemployed in education or training (Charts A and B). It has increased by, in one year.
8 18 1 Chart A France: Unemployment per employment agency s category D definition (in thousands of people) In absolute terms (LHS) Month-on-month change (RHS) 1 1 7 8 9 1 11 1 1 1 1 1 17 8 7 1-1 - - 1 9 Chart B France: Unemployment per employment agency s category D definition (in thousands of people) In absolute terms (LHS) Month-on-month change (RHS) 8 7 Jan-1 Jul-1 Jan-1 Jul-1 Jan-17 7 1-1 So there is no anomaly between unemployment and employment in France. Employment and the number of job-seekers in education or training have increased by 1, in one year. If we subtract 1, (the labour force), we get 11,, which is close to the fall observed in unemployment (1,). Consistency between trends in employment and value added Here we examine whether the trend in employment is consistent with that in value added, overall and by major sector of the economy. When we look at the recent trend in productivity gains, job creation appears strong relative to value added in business and financial services and in other private services (rest of the economy, Charts A to F), with sharp declines in productivity in both sectors since 1. Chart A France: Employment, real GDP and per capita productivity (Y/Y as %) () Employment (1) Real GDP () Per capita productivity (= 1 / ) 1 Chart B France: Employment, value added and productivity in the manufacturing sector (Y/Y as %) () Manufacturing employment (1) Manufacturing value added () Per capita productivity (= 1 / ) 1 1-1 - - 7 8 9 1 11 1 1 1 1 1 17 1-1 - - 9 - - -9-1 7 8 9 1 11 1 1 1 1 1 17 9 - - -9-1
Chart C France: Employment, value added and per capita productivity in the construction sector (Y/Y as %) (1) Employment () Value added in volume terms () Per capita productivity (= 1 / ) Chart D France: Employment, value added and productivity in the business and financial services sectors (Y/Y as %) Employment Value added in volume terms Productivity - - - - - -8 7 8 9 1 11 1 1 1 1 1 17 - -8 Sources: INSEE, Natixis - 7 8 9 1 11 1 1 1 1 1 17-1 1 Chart E France: Employment in general government (Y/Y as %) 1. 1..9 Chart F France: Employment, value added and productivity in the rest of the economy* (Y/Y as %) Waged employment Value added in volume terms Productivity (*) = Total economy - [manufacturing + construction + business + financial services + general government) 1... - - 7 8 9 1 11 1 1 1 1 1 17 -. Sources: INSEE, Natixis 7 8 9 1 11 1 1 1 1 1 17
Job creation was vigorous: - With regard to business services, in administrative, legal, accounting, engineering and technical services (Chart A); - With regard to domestic services, in retail, catering, transport and logistics (Charts B and C). Chart A France: -quarter change in employment (in thousands of persons) Financial services and insurance Legal, accounting, management, architecture, engineering and technical control and analysis services Research-scientific development Other specialised, scientific or technical activities Other administrative and support services 1 1 - -1-1 - Sources: INSEE, Natixis - 7 8 9 1 11 1 1 1 1 1 17 1 1 - -1-1 - - Chart B France: -quarter change in employment (in thousands of persons) Trade and repair of cars and motorcycles Wholesale trade, excl. cars and motorcycles Retail trade, excl. cars and motorcycles Lodging Restaurants 1 1 - -1-1 - Sources: INSEE, Natixis - 7 8 9 1 11 1 1 1 1 1 17 1 1 - -1-1 - - 1 1 - -1-1 Chart C France: -quarter change in employment (in thousands of persons) Transport and storage Arts, entertainment and recreation Other service activities Households' activities as employers - Sources: INSEE, Natixis - 7 8 9 1 11 1 1 1 1 1 17 1 1 - -1-1 - - Strong job creation may be due to a fall in labour costs. France has introduced the tax credit for competitiveness and employment (CICE - reductions in taxes on profits linked to the payroll) and incentives for SMEs to hire. Chart 7A shows the tax burden facing French companies. Chart 7B shows unit labour costs, Chart 7C the real wage (calculated with the GDP deflator). 18 1 1 1 Chart 7A France: Companies' social contributions and total* corporate taxes (as % of nominal GDP) Companies social contributions Total corporate taxes (*) Social contributions + taxes on profits + production taxes + miscellaneous taxes 1 7 8 9 1 11 1 1 1 1 1 17 18 1 1 1 1 1 1 1 1 1 1 1 11 11 1 1 Chart 7B France: Unit labour cost :1 = 1 (LHS) Y/Y as % (RHS) 9 Sources: Datastream, Eurostat, INSEE, Natixis 9 7 8 9 1 11 1 1 1 1 1 17 1-1
1 1 1 118 11 11 11 11 18 1 1 1 1 98 9 Chart 7C France: Real per capita wage* (deflated by GDP deflator) :1 = 1 (LHS) Y/Y as % (RHS) (*) Including companies' social contributions Sources: Datastream, Eurostat, Natixis 7 8 9 1 11 1 1 1 1 1 17... 1. 1... -. We see no major labour cost effect. The tax burden has been eased a little in the recent period; unit labour costs have not slowed particularly (Chart 7B); real wages have increased at the same pace as productivity (.% per year, Charts A and 7C). Conclusion: Are we able to explain the recent trend in unemployment in France? Unemployment in France has fallen by 1, year on year, which is considerable. We have examined the consistency between the trends in: - Unemployment and employment as well as the labour force: they are consistent; - Employment and value added as well as labour costs. There has been no noticeable fall in labour costs that may explain a sharp increase in employment. There has been very strong job creation, dragging down productivity in a number of business services (administrative, legal, accounting, engineering and technical services) and domestic services (retail, catering, transport and logistics). This seems to reflect: - The development of new technologies (technology and IT services); - The uberisation of society (jobs in retail, logistics and catering). The employment puzzle in France therefore probably stems from start-ups and uberised jobs - the two extremes of new technologies. 7
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